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Will the FCC Force Television Online Even If Aereo Loses in Court?

The Supreme Court hears oral arguments today in a case that will decide whether Aereo, an over-the-top video distributor, can retransmit broadcast television signals online without obtaining a copyright license. If the court rules in Aereo’s favor, national programming networks might stop distributing their programming for free over the air, and without prime time programming, local TV stations might go out of business across the country. It’s a make or break case for Aereo, but for broadcasters, it represents only one piece of a broader regulatory puzzle regarding the future of over-the-air television.

If the court rules in favor of the broadcasters, they could still lose at the Federal Communications Commission (FCC). At a National Association of Broadcasters (NAB) event earlier this month, FCC Chairman Tom Wheeler focused on “the opportunity for broadcast licensees in the 21st century . . . to provide over-the-top services.” According to Chairman Wheeler, TV stations shouldn’t limit themselves to being in the “television” business, because their “business horizons are greater than [their] current product.” Wheeler wants TV stations to become over-the-top “information providers”, and he sees the FCC’s role as helping them redefine themselves as a “growing source of competition” in that market segment.

If TV stations share Chairman Wheeler’s vision for their future, the FCC’s “help” in redefining the role of broadcast licensees in the digital era could represent a potential win rather than a loss. If Wheeler truly seeks to enable TV stations to deliver a competitive, fixed and mobile cable-like service, it could signal a positive shift in the FCC’s traditionally stagnant approach to broadcast regulation.

Like all regulatory pronouncements, the devil is always in the details — notwithstanding the existing and legitimate skepticism that TV stations have as to whether the FCC can and will treat them fairly in the future. For better or worse, many will judge the “success” of the broadcast incentive auction by the amount of revenue it raises. This reality provides the FCC with unique incentives to “encourage” TV stations to give up their spectrum licenses. In Washington, “encouragement” can range from polite entreaty to regulatory pain.

After the FCC imposed new ownership limits on TV stations last month, some fear the FCC will choose pain as its persuader. Last month’s FCC action prompts them to ask, if Wheeler is sincere in his desire to help broadcasters pivot to a broader business model, why impose new ownership limits on TV stations that could hinder their ability to compete with cable and over-the-top companies?

Chairman Wheeler attempted to address this question in his NAB speech, but his answer was oddly inconsistent with his broader vision. He said the FCC’s new ownership limits are rooted in the traditional goals of competition, diversity, and localism among TV stations. That only makes sense, however, if you believe TV stations should compete only with other TV stations. Imposing new ownership limits on TV stations won’t help them pivot to a future in which they compete in a broader “information provider” market — it would hinder them.

I expect TV station owners are wondering: If we accept Chairman Wheeler’s invitation to look beyond our current product, will he meet us on the horizon? Or will we find ourselves standing there alone? It’s hard to predict the future, because the future is always just over the horizon.